The inaugural Quarterly Survey of Apartment Construction & Development Activity (Construction Quarterly Survey for short) was conducted from March 7 – 21, 2022 and received 38 responses from leading multifamily construction and development firms. Data from all questions are also available in a downloadable spreadsheet.
Average Materials Price Change in 1Q 2022
14%
Exterior Finishes & Roofing
15%
Electrical Components
5%
Appliances
12%
Insulation
45%
Lumber
During the March 2022 Construction Quarterly Survey, the majority of respondents reported experiencing construction delays (89 percent) and of those experiencing overall delays, 85 percent reported delays in both starts and permitting. As indicated previously in the NMHC COVID Construction Survey, starts and permitting were persistent throughout the pandemic, and the results of this survey are no different, indicating that delays will continue for the foreseeable future .
There are a wide range of reasons for delayed starts, some of which have more readily available alternatives and solutions than others. For those respondents experiencing delayed starts, the largest contributing factors are permitting, entitlement, and professional services (75 percent), materials sourcing/delivery (64 percent), and staffing shortages (43 percent). In a testament to the progress made since the beginning of the COVID-19 pandemic, not a single respondent indicated health and safety concerns were the cause of delays. Only 18 percent cited economic uncertainty.
Over the past three months, how long, on average, have municipalities reported it would take before you receive building permits?
| March 2022 | |
|---|---|
| Up to 2 Months | 13% |
| 3-4 Months | 32% |
| 5-6 Months | 26% |
| 7-8 Months | 5% |
| 9+ Months | 13% |
| N/A | 11% |
More than one-third (37 percent) of respondents reported jurisdictions are actually imposing additional project requirements unrelated to actual project construction, although over half (53 percent) of respondents have not experienced this taking place. Specific requirements mentioned by respondents include aspects such as traffic studies, offsite infrastructure and utilities, and impact fees.
Nearly all respondents (92 percent) reported that deals have been repriced up over the past three months. Those experiencing deals being repriced reported increases of 25 percent on average, over the same period.
The price of lumber continues to be one of the more significant obstacles to apartment construction, with the average respondent reporting a 45 percent increase in prices over the past three months. The average respondent similarly reported a 15 percent increase in the price of electrical components over the past three months, a 14 percent increase in prices for exterior finishes and roofing, a 12 percent increase in prices for insulation, and a 5 percent increase in prices for appliances.
Survey respondents reported using alternative brands or suppliers to mitigate price increases for exterior finishes and roofing (63 percent) and appliances (50 percent). Insulation and lumber are not easily substituted and therefore had other more cited mitigation techniques, or potentially fewer possible mitigation options, indicated by those reporting “not applicable.”
Which of these approaches have you adopted to mitigate the price increases/supply shortages for each material? (multiple selection - totals will not equal 100%)
| Exterior Finishes and Roofing | Electrical components | Appliances | Insulation | Lumber | |
|---|---|---|---|---|---|
| Used alternative brands or suppliers | 63% | 37% | 50% | 26% | 18% |
| Used alternative product/material types | 42% | 39% | 21% | 21% | 18% |
| Made design changes | 34% | 29% | 8% | 16% | 24% |
| Changed purchasing schedules including pre-purchasing and/or warehousing products/materials | 55% | 45% | 34% | 21% | 42% |
| Given greater focus on escalation clauses and acceptance of higher escalations | 55% | 45% | 26% | 39% | 50% |
| N/A | 13% | 11% | 21% | 24% | 18% |
While these five materials have been demonstrated issues for some construction and development firms, they are not the only materials and products that have faced price increases or supply chain shortages. To gain a better understanding of other materials of issue, respondents were asked about a more extensive list of common materials and products, seen in the table below.
For which materials have you made alterations or used alternative products/materials? (multiple selection - totals will not equal 100%)
| March 2022 | |
|---|---|
| Lumber | 37% |
| Plywood | 34% |
| Interior wood trim | 37% |
| Copper and brass mill shapes | 13% |
| Steel mill products | 13% |
| Hardware - locks, door/window hardware, cabinet hardware | 26% |
| Lighting fixtures | 47% |
| Exterior Finishes | 42% |
| Electrical components - panels and items with chips | 21% |
| Roofing | 37% |
| Appliances | 45% |
| Insulation | 26% |
| Ready-mix concrete | 5% |
| Other | 5% |
Labor availability and logistics/transportation have also become obstacles to apartment construction. The majority of survey respondents (55 percent) reported that labor costs increased more than expected over the last three months, while an additional 39 percent believed labor costs increased about as expected Two-thirds (63 percent) of respondents believed construction labor to be less available compared to three months ago, while one-third (34 percent) saw labor availability as roughly the same.
Given current challenges in the importation and transportation of goods, what are you doing to mitigate the negative impacts of these conditions? (multiple selection - totals will not equal 100%)
| March 2022 | |
|---|---|
| Sourcing more products/materials domestically | 34% |
| Sourcing more products/materials from Canada | 3% |
| Sourcing more products/materials locally or from specific domestic regions | 17% |
| Using alternative products/materials | 37% |
| Other | 9% |
Some (13 percent) respondents indicated that they are seeking out more construction projects in the Southeast (e.g., Atlanta, Charlotte, and Orlando) due to fewer issues in the region related to sourcing labor and delays in permitting and entitlement. Meanwhile, a handful of respondents reported that they are no longer seeking out projects in the Northeast and South Florida due to greater obstacles in those markets related to permitting and entitlement processes and labor availability. However, the majority (74 percent for leaving jurisdictions and 68 percent for seeking out jurisdictions) of survey respondents reported the question was not applicable, indicating these movements are not yet a widespread phenomenon.
About the NMHC Quarterly Survey of Apartment Construction & Development Activity
Given the invaluable support the NMHC COVID Construction Survey provided for our work on Capitol Hill as well as for our members throughout the pandemic, NMHC launched this new iteration of the survey to be more ongoing and branch beyond the obstacles of the pandemic. While the pandemic’s effect on health and safety has become better controlled, its effects on the construction industry persist with supply chain obstacles and ongoing delays related to issues with staffing to permitting and entitlement. Issues beginning to draw concern pre-pandemic in the industry are now continuous impediments to building that threaten to worsen the affordability crisis.
